Assume BDS Acquired Its Main Supplier, ABC

question 88

Multiple Choice

Assume BDS acquired its main supplier, ABC.As a result of the acquisition, BDS finds that its profit margin increased but its ROA remained constant.A decrease in which one of these ratios is most apt to be the reason why the ROA did not increase with the increase in the profit margin?

• A)leverage ratio
• B)market-to-book ratio
• C)asset turnover
• D)debt burden

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Definitions:

Controlling Person

An individual or entity that has the power to direct or influence the management and policies of a company, typically through ownership of a significant portion of voting shares.

Affirmative Defense

A defendant’s response to a plaintiff’s claim in which the defendant attacks the plaintiff’s legal right to bring the action rather than attacking the fact of the claim or making excuses for unlawful behavior. Common

GAAS

Generally Accepted Auditing Standards, which are guidelines that auditors follow when conducting audits on companies' finances.

GAAP

Generally Accepted Accounting Principles, which are a common set of accounting rules and standards for financial reporting.